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Often times when analyzing an open-end fund, one looks at past performance and the manager of the fund. When analyzing ETFs, this is not the way to go about it. In fact, it is better to look ahead rather than behind.

Roger Nusbaum, a contributor to RealMoney.com, illustrates through the analysis of iShares Canada (EWC), that ETF selection involves selecting the best product to capture a given effect. In other words, don’t look at Canada’s past performance, look at the fact that energy is a big portion of the ETF and the demand for oil is increasing throughout China, India and the U.S. In this case, EWC is the product and increased demand for energy is the effect.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.